**Brussels**: As the EU’s Unfair Trading Practices Directive takes effect, the agri-food supply chain faces pressures to adopt fair and transparent practices. Despite some awareness, many suppliers remain uninformed of their rights, highlighting the need for compliance and collaborative growth in trading relationships.
As regulation intensifies within the agri-food supply chain, buyers are facing mounting pressures to ensure that their trading practices are fair, transparent, and sustainable. The European Union (EU) has introduced the Unfair Trading Practices (UTP) Directive, a legislative framework aimed at addressing longstanding imbalances by safeguarding smaller suppliers through the enforcement of specific obligations on buyers.
Since its implementation, the UTP Directive has not only served as a compliance requirement but has also established a foundation for fostering long-term, mutually beneficial trading relationships designed to benefit all parties involved in the supply chain. The directive aims to level the playing field, particularly for smaller suppliers who may previously have been vulnerable to unfair trading conditions.
In an overview of the legislation, it outlines its scope and applicability across all EU Member States. Although it provides minimum requirements, individual countries are permitted to adopt stricter rules if they wish, necessitating that businesses engaged in cross-border trading comprehend both the EU-wide framework and any heightened regulations within specific jurisdictions. Notably, the directive applies to trading relationships where one partner—either a buyer or a supplier—operates within the EU. Consequently, agri-food companies outside the EU that engage with EU-based businesses must be aware of these regulations to ensure compliance.
Importantly, the directive also employs various turnover tiers to identify which supplier-buyer relationships fall within its scope. Suppliers with an annual turnover of up to €350 million can avail themselves of the protection it affords, contingent upon the size of the buyer. Companies are encouraged to evaluate their standing in this hierarchy to pinpoint the trading relationships that are impacted by the legislation.
A concerning development has emerged from a recent EU-wide survey indicating that approximately 30% of agri-food suppliers remain unaware of the UTP Directive, highlighting a significant gap in knowledge about their rights and protections under the law. This lack of awareness could lead to suppliers being treated unfairly or failing to assert their rights effectively. Additionally, while the survey reports a reduction in unfair practices over the past five years, a notable portion of industry professionals still perceives these issues as prevalent, with many affirming that unfair practices targeted by the directive occur in over 20% of their transactions.
At the core of the UTP Directive are two lists of trading practices categorised as unfair. The “black list” consists of practices that are unequivocally prohibited, while the “grey list” covers practices that may be permitted only if pre-agreed in a transparent manner.
The black list encompasses three primary areas of compliance, detailing ten specific practices that undermine trust and create volatility within trading relationships. These include delayed payments for perishable goods beyond 30 days and short-notice cancellations of orders. The grey list, meanwhile, involves practices where costs typically expected to be borne by the buyer could be shifted to the supplier, such as charges for advertising and promotional costs. Clarity and prior agreement are crucial to the lawful application of these grey list practices.
Enforcement of these regulations is robust, granting authorities the power to initiate investigations without formal complaints, demand documentation, and conduct unannounced inspections, alongside the ability to impose fines and publicise enforcement outcomes. As concerns about rule effectiveness linger, regulatory bodies remain vigilant about ensuring compliance within the sector.
Auditable processes are crucial for both buyers and suppliers, as compliance not only necessitates alignment with black list prohibitions but also hinges on the ability to prove adherence to grey list provisions. Given these complexities, operational challenges such as maintaining proper documentation and clear transaction agreements are essential.
Enable, a firm active in the agri-food sector, is working alongside businesses to aid compliance with the UTP legislation. Their platform offers solutions such as centralising trading agreements, establishing comprehensive audit trails, and tracking interactions from drafting to final sign-off. By promoting structure, transparency, and collaboration, Enable seeks to strengthen trading relationships while ensuring legal obligations are met.
In summary, while compliance with the UTP legislation remains critical, there is a broader opportunity for buyers and suppliers to collaborate sustainably. By fostering a shared understanding of the established rules and committing to equitable practices, stakeholders in the agri-food supply chain can facilitate mutual growth and success.
Source: Noah Wire Services
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